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| US's triple-A credit rating 'under threat' |
| 2008-01-12 |
| It can't be said they haven't been warned a zillion times. The US is at risk of losing its top-notch triple-A credit rating within a decade unless it takes radical action to curb soaring healthcare and social security spending, Moody's, the credit rating agency, said yesterday. The warning over the future of the triple-A rating - granted to US government debt since it was first assessed in 1917 - reflects growing concerns over the country's ability to retain its financial and economic supremacy. It could also put further pressure on candidates from both the Republican and Democratic parties to sharpen their focus on healthcare and pensions in the run-up to November's presidential election. Most analysts expect future administrations to deal with the costs of healthcare and social security and there is no reflection of any long-term concern about the US's financial health in the value of its debt. But Moody's warning comes at a time when US confidence in its economic prowess has been challenged by the rising threat of a recession, a weak dollar and the credit crunch. In its annual report on the US, Moody's signalled increased concern that rapid rises in Medicare and Medicaid - the government-funded healthcare programmes for the old and the poor - would "cause major fiscal pressures" in years to come. Unlike Moody's previous assessment of US government debt in 2005, yesterday's report specifically links rises in healthcare and social security spending to the credit rating. "The combination of the medical programmes and social security is the most important threat to the triple-A rating over the long term," it said. Steven Hess, Moody's lead analyst for the US, told the Financial Times that in order to protect the country's top rating, future administrations would have to rein in healthcare and social security costs. "If no policy changes are made, in 10 years from now we would have to look very seriously at whether the US is still a triple-A credit," he said. Mr Hess said any downgrade in the US rating would have serious consequences for the global economy. "The US rating is the anchor of the world's financial system. If you have a downgrade, you have a problem," he said. Moody's did once threaten to cut the rating of some of the US Treasury's debt when Congress refused to pass the president's budget in the mid-1990s. Other large economies, notably Japan in the 1990s, have had to suffer the symbolic blow of losing their top-notch credit rating. Last year, David Walker, comptroller general of the US, caused controversy when he compared America's current situation with the dying days of the Roman empire and warned the country was on "a burning platform" of unsustainable policies. Medicare and Medicaid spending, which has risen sharply over the past few decades and now accounts for about 45 per cent of total federal spending, up from about 25 per cent in 1975, has long been a source of concern. Last month, Peter Orszag, director of the Congressional Budget Office, which advises Congress on the federal budget, said the issue was "the central fiscal challenge" facing the US. Most presidential candidates have vowed to reform the healthcare system but many of them, especially on the Democratic side, have focused on extending coverage to the 40m-plus uninsured Americans rather than on cutting costs. |
| Posted by:gorb |
| #4 Sounds like a liberal at Moody's wants a tax hike. It's amusing that these guys still rate a lot of asset backed securities (aka toxic waste) AAA. Of course, they get paid by the companies that issue asset backed securities but not by Uncle Sam. I look forward to Moody's getting sued out of existence by the holders of asset backed security when they lose trillions of dollars. |
| Posted by: Zhang Fei 2008-01-12 23:03 |
| #3 The US is at risk of losing its top-notch triple-A credit rating within a decade WITHIN A DECADE? Bullshit piece if panic-crap. |
| Posted by: Redneck Jim 2008-01-12 14:15 |
| #2 Will it be the next Congress or the one after that that starts taxing Social Security, Medicare, Medicaid payments to the top income brackets... and then the next lower income brackets, and then... |
| Posted by: trailing wife 2008-01-12 12:41 |
| #1 Moody's did once threaten to cut the rating of some of the US Treasury's debt when Congress refused to pass the president's budget in the mid-1990s. Which resulted in the gutting of Defense and relying upon Madam Halfbright an her diplomacy as a substitute. We all know how well that worked out in the long run. Penny wise, Dollar foolish. How much has the WoT cost so far? Bean counters should be held accountable as well. |
| Posted by: Procopius2k 2008-01-12 09:13 |